A day after the Sensex plunged 807 points, sending jitters among investors, finance minister Arun Jaitley on Friday said there was no need for “exaggerated panic”, and assured the government will continue to take steps to support growth.
“There need not be any exaggerated panic in India for the reason that India as an economy even in the midst of global slowdown has clearly stood out to maintain a 7.5% growth rate,” Jaitley said. “... It would be a part of prudent investment reaction that the inherent strength of Indian economy is kept in mind by investors, rather than react disproportionately to what the global developments are.”
The finance minister, who will be presenting the Union Budget on February 29, stressed that the government is committed to support the public sector banks (PSBs), and will provide more tools to help them recover bad loans, which are hurting their profitability.
The fall in the markets on Thursday was a result of a chain reaction from a sell-off in other major global markets, Jaitley said. Weak earnings of PSBs also led to the mayhem. “There could be several reasons, which are predominantly outside the country, the uncertainty in the Fed (USFederal Reserve) rate, or what’s happening in Europe or the slowdown anticipated in China. Now, these global factors will remain and will have to be tackled globally by those economies.”
The finance minister highlighted that services and manufacturing sectors were recovering, and will improve further on account of monsoon. The government will continue taking steps to support economic growth, he added.
The government is formulating policies and “is conscious of the areas of support, which are required to be given to the economy and fully committed to providing those support”, he said.
While several PSBs are running into losses with the RBI tightening the provisioning norms, Jaitley said the government will take more steps to enable banks in improving their recovery mechanism. “The bankruptcy law is under active consideration... The government is also considering some further steps to empower banks to be in a position to recover these monies (non-performing assets). I think it’s a problem, which will soon come under control.”
As on September, the gross non-performing assets —loans that do not yield returns — of public sector banks have increased to Rs 3.01 lakh crore, as against Rs 2.67 lakh crore in March.
“These (NPAs) are the loans, which have earlier been given by these banks and as a part of prudent policy it has been considered the balance sheets should be transparent. The banks are going to take all steps possible to recover the loans,” he said.